Renrenle, once known as one of the "Big Three Supermarkets in Guangdong" along with China Resources Vanguard and Xinyijia Supermarket, has fallen into a crisis again with massive losses. In its 2023 annual performance report, Renrenle announced revenue of 2.853 billion yuan, a year-on-year decrease of 28.15%, and a net loss attributable to shareholders of approximately 498 million yuan. The audited net profit before and after deducting non-recurring gains and losses was approximately 579 million yuan. Previously, Renrenle recorded net losses attributable to shareholders of 857 million yuan in 2021 and 507 million yuan in 2022, with non-recurring net losses of 795 million yuan and 540 million yuan respectively. Additionally, the company's net assets were negative at the end of 2023. As a result, Renrenle has been subject to "delisting risk warning." After resuming trading on April 22, the stock was renamed "ST Renrenle." If net assets remain non-positive by the end of 2024, the company will be forced to delist.
Twice Escaped Compulsory Delisting
In fact, this is not the first time Renrenle has been "starred and hatted." As early as 2014 and 2015, Renrenle suffered consecutive huge losses of 461 million yuan and 475 million yuan, respectively, leading to ST status in 2016. At that time, to turn around and retain its listed company status, Renrenle sold the Changsha Tianjiao Fudi property for 436 million yuan in September 2016. This sale contributed 135 million yuan in net profit, accounting for 223.14% of total net profit. However, shortly after removing the ST label, Renrenle fell into losses again in 2017, and this time it lost money for two consecutive years: net losses of 538 million yuan in 2017 and 355 million yuan in 2018. Consequently, the stock was again subjected to delisting risk warning in 2019. Renrenle again resorted to "selling assets": in 2019, out of net profit of 38.048 million yuan, the company generated investment income of 192 million yuan from equity disposals; in 2020, out of net profit of 35.3828 million yuan, it realized investment income of 369 million yuan from disposing of equity in subsidiary Xi'an Renrenle Industrial Co., Ltd., and asset disposal income of 80.6933 million yuan from transferring the Yonghefang project assets of wholly-owned subsidiary Xi'an Renrenle Supermarket Co., Ltd. Renrenle's two "star removals" were not due to improved profitability of its main business, but rather forced "life support" through asset sales and equity transfers.
Challenged Foreign Giants and Went Public in Style
Founded in 1996, Renrenle also had its glorious moments, once earning the reputation of "Little Walmart." From 2002 to 2008, the total sales scale of the top 100 national chain enterprises grew at an average rate of over 30%. During this period, the domestic consumer goods market flourished, and domestic retail chain enterprises ushered in a golden era of development, but they also faced competition from foreign giants like Walmart and Carrefour. At that time, Renrenle founder He Jinming actively learned from competitors, borrowing their business models, studying details such as shelf layout and product placement in overseas retail, while adopting a strategy of "comprehensive low prices and complete merchandise." Under this strategy, even with the squeeze from foreign retail giants like Walmart, Carrefour, and Lotus (later renamed CP Lotus), Renrenle carved out its own territory in Shenzhen, Guangdong. Meanwhile, Renrenle pursued a "honeycomb" expansion strategy: first entering a regional center, then quickly opening multiple new stores in the region once mature, to form scale and brand advantages. At the same time, it avoided the developed coastal areas where foreign giants were heavily investing, and instead expanded into central and western regions, tapping into blank markets overlooked by overseas retailers. As early as 2004, Renrenle had opened over 40 hypermarkets across four major regions in China: South China, North China, Southwest, and Northwest. From 2007 to 2009, Renrenle's operating revenue was 3.985 billion yuan, 4.956 billion yuan, and 8.767 billion yuan, respectively, with net profits of 244 million yuan, 253 million yuan, and 230 million yuan. In 2010, Renrenle successfully listed on the A-share market, becoming the second private chain supermarket to go public after Bubugao. That same year, its operating revenue exceeded 10 billion yuan for the first time.
The End of the "Little Walmart" Hero
However, listing seemed to be a watershed, after which Renrenle could no longer be "happy." The year after listing, net profit fell by 28.52%. By 2012, net profit plummeted by over 200%, resulting in a loss of 187 million yuan. Although Renrenle managed to turn profitable in 2013 by closing loss-making stores and strengthening gross margin and cost controls, since then, its main business has been loss-making year after year. Why did this once-local star supermarket enterprise, which could compete with foreign retail giants like Walmart and Carrefour, fall into a predicament of annual huge losses and needing to sell assets to retain its listed status? There are four main reasons:
First, after 2010, with the development of the internet, domestic e-commerce rose rapidly, impacting the entire traditional retail industry to varying degrees. The supermarket industry inevitably entered a period of declining market growth, and Renrenle was no exception. To counter the impact of e-commerce, like many traditional supermarket companies, Renrenle also developed new online platforms such as the Renrenle Shopping Business Platform and the Renrenle Park APP, but these measures not only failed to stop the decline in revenue but also further expanded losses.
Second, the slowdown in expansion was also a core reason for Renrenle's huge losses. In 2011, when the entire traditional retail industry entered a downturn, Renrenle, holding a large amount of cash, launched a store-opening spree, opening 24 stores at once. Soon, Renrenle paid a high tuition fee for blind expansion. In 2014 and 2015, Renrenle experienced a wave of store closures: in 2014, it closed 18 stores, incurring a loss of 163 million yuan; in 2015, it closed 11 stores, losing 191 million yuan.
Third, Renrenle's operational efficiency was low. For retail enterprises, core competitiveness is often reflected in their operational capabilities. However, Renrenle's operating expense ratio was significantly higher than peers. From 2014 to 2016, Renrenle's average operating expense ratio was as high as 23.53%, while Sanjiang Shopping and Yonghui Superstores were 18.12% and 17.06%, respectively, making Renrenle's ratio about 5 percentage points higher than peers.
Fourth, internal management turmoil was also an important reason for Renrenle's decline. Just one year after listing, CEO Li Yanfeng voluntarily resigned, along with purchasing director Wang Niuzai and others. Subsequently, supermarket business unit vice president Li Kuansen, company vice president Zeng Fanhong, and other senior executives also left Renrenle. A former executive who left told the media that after the company went public, many executives felt their value was not "materially affirmed," i.e., through equity incentives. Additionally, there were issues of nepotism within the enterprise. Before being acquired by Xi'an Qujiang Cultural Investment, about 75% of Renrenle's equity was controlled by He Jinming and his family. Coupled with the post-listing executive exodus, Renrenle found it difficult to attract excellent professional managers.
Final Thoughts
Xinyijia went bankrupt and restructured, and now Renrenle is facing delisting. The former "Big Three Supermarkets in Guangdong" are now "one dead, one injured," which is indeed lamentable. In fact, not only Renrenle, but in recent years, listed supermarket companies as a whole have continued to face performance pressure. In March this year, according to statistics from "Lianshang.com" on eight major supermarket companies that had released 2023 performance forecasts or results, many traditional supermarket companies had mixed results, achieving some success through transformation and reform, but still facing considerable pressure in performance. From the published performance forecasts, half of the companies were loss-making, with only Jiajiayue, Liqun Shares, Sanjiang Shopping, and Hualian Shares achieving profitability. Facing the situation of "internal and external troubles," China's once-prosperous retail supermarket enterprises can only survive the storms by continuously adapting to the times and changing themselves.
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